European luxury goods market thrives on Russian tourists

More and more Russians buy luxury goods abroad. Source: AFP / East News

While the ongoing recession has pressured Europeans and Americans into spending cuts, tourists from Russia and China have been pushing up luxury sales. In Dubai, Russians are the biggest-spending foreign consumers.

With demand stagnant on the
domestic market, Russian tourists are emerging as an increasingly important
target group for European luxury brands, said Bain & Company partner,
Claudia D’Arpizio. In Dubai, Russians have proven to be the biggest-spending
non-resident group, she added.

“Russian tourists have effectively rescued the
European market during the ongoing Eurozone crisis, which has led to luxury
goods spending cuts by Europeans,” said Kira Balashova, COO of Jamilco, a group
of companies acting as an official distributor of luxury and premium brands in
Russia, including Burberry, Salvatore Ferragamo and Escada.

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“Russians tend to spend more
during their trips than other European tourists,” believes Anastasios Liaskos,
Secretary General of the Ministry of Tourism of Greece. It’s a question of
mentality: Russians want to enjoy themselves, and they are willing to pay in
order to have a good time.

Head of the Russian Ministry of Culture (supervising
the tourism industry), Vladimir Medinsky, said in March that Russian tourists
were spending $2,200 on average during holidays (including the cost of the tour
package).

Russians are the second
biggest-spending foreign group of customers on the European market, according
to the tax free shopping operator Global Blue. In 2012, the volume of tax free
purchases rose 31 percent to roughly 1.44 billion euros ($1.87 billion).

According to Global Blue, Russian tourists reclaim taxes for about half of
their European purchases, which puts the actual spending at twice the amount,
around 2.9 billion euros ($3.77 billion).

The United Nations World Tourism
Organization estimates that Russians spent $43 billion on international tourism
in 2012, placing them firmly among the top five in terms of holiday spending.
The list is topped by China, which spent an estimated $102 billion last year.

“Russians tend to buy more
luxury goods abroad than they do on the domestic market, which has a tendency
to affect the sales of Russian distributors,” Balashova says. She also
mentioned “a certain decline in the demand for luxury goods on the Russian
market,” observed last year.

Balashova believes that "with
the Russian market slowing down, and more and more Russians shopping abroad or
online, Russian regulatory authorities should carefully consider measures to
remedy the situation; for one, they should bring down customs barriers for
Russian distributors."